Year-end tax planning isn’t a one-size-fits-all affair. Like many aspects of running a business, your situation depends on your circumstances, as well as your particular business structure.

It is important to understand all necessary steps of the process, as well as when the final deadline is, as this is when the tax year reset will take place for your credits, deductions, and tax allowances.

Although this article will help you navigate your year-end tax planning, we recommend seeking advice from financial professionals to ensure all is done correctly. This will ensure you’re not missing out on any potential allowances or benefits.

Year-End Tax: Important Dates

Some important tax dates include:

6th March 2024 – The Spring Budget

This is when the Spring Budget will be held, which means tax changes may apply, as 2024 is an election year. Be mindful that this may include changes to National Insurance too.

30th December 2024 – Tax Return Deadline

This is the deadline to submit your online tax return for automatic payment of owed funds from your wages and pension. 

31st January 2025 – Self Assessment Tax Deadline

This is the deadline for online self-assessment tax returns for the 2023/24 tax year. 

1st February 2025 – Late Payment Penalty

This is when the third automatic late payment penalty of 5% will apply to any outstanding 2022/23 tax.

5th/6th April 2025 – Year End Tax Deadline

The final deadline for your 2024 year-end tax planning will be on the 5th of April 2025 (with the 6th of April being the first day of the new tax year), which is also when you will be reviewing your annual personal income, which also provides an understanding of your company’s tax band (and how it will impact your income).

National Insurance Contributions (NICs) Rate Changes

The 2023 Autumn Statement outlined a number of changes to the 2024 NIC rate, including:

• Class 1 NICs reduced from 12% to 10% from 6 January 2024
• Class 4 NICs reduced from 9% to 8% from 6 April 2024
• Class 2 NICs are no longer required to be paid from 6 April 2024.

Taxable Income Reductions 2024

The 2024 taxable income reductions will herald many advantages for business owners. One example is that it may lessen the chances of top-slice income, forcing organisations into higher tax bands. Another will be the reduction of personal allowance by £1 for every £2 of net income over £100,000.

Businesses looking for ways to reduce taxable income can consider moving certain investments into non-taxable investments, as well as pension contributions and charitable donations.

Other options include:

• Deferring income into another tax year
• Moving income-providing assets to a spouse/civil partner
• Trading losses that occurred in the first 4 years of business.

Child Benefits

Reducing taxable income is also auspicious for retaining child benefits (for parents who keep their annual income below £50k), as child benefits are recovered at 1% of the benefit for every £100 of income over £50,000.

Pensions

Business owners are not expected to pay tax on pension contributions as long as they don’t go over their annual allowance, which means employer pension contributions are efficient for reducing taxable income.

Employers who sacrifice a percentage of their own salary for the sake of pension contributions can expect to see a reduction in NICs (which is particularly beneficial for startups and SMEs). 

Be mindful that individuals who earn over £200k can expect to see pension contributions added back, as tax relief restrictions are in place for gross funds over £260k.

Rules surrounding pension-focused tax relief can be convoluted, so it can be wise to seek financial advice to ensure annual allowances tax relief isn’t clawed back.

Tax-Efficient Investments By Numbers

Certain tax-efficient investments can be carried back to previous years to ensure tax relief. For example:

• 100% of EIS-qualifying investments can be carried back to the previous tax year.
• £1 million of investments are permitted (£2 million for one or more qualifying knowledge-intensive companies).
• 30% tax relief is available & can be carried back to the previous year.
• Startups can claim up to 50% income tax relief (up to £200k), which can also be carried back to the prior tax year.

Spouses With a Lower Tax Rate

We touched upon this earlier, but it can be beneficial to put the business income in the name of the spouse/partner who has the lowest tax rate, particularly if you receive property income.

Other Considerations

Assess the following:

• Dividend tax rates – these are lower than main income rates.
• Capital gains – these can be tax-efficient as Capital Gains Tax is lower than most personal taxes (up to 20%).
• Company cars – opting for more carbon-neutral vehicles will reduce tax. For example, an electric car has a taxable benefit of 2% per 130 miles.
• Basis period – the ‘basis period’ will occur when taxing profits and will come into place during the 2024/25 tax year.

Final Thoughts

There are other ways of reducing tax, of course, but the most important thing you can do is to start your tax planning now. To find out how, as well as how to navigate the 2024 tax changes, get in touch today.

Disclaimer: The information presented in this blog post is accurate to the best of our knowledge and based on the latest available information as of the date of posting, which is 21st December 2023. However, please note that information, laws, regulations, and circumstances can change over time. Therefore, we cannot guarantee the accuracy, completeness, or currency of the information provided. It is always recommended to verify any information independently and consult with relevant professionals or experts for specific advice or updates. The authors and publishers of this blog post shall not be held liable for any errors, omissions, or outdated information, or for any actions taken based on the information provided in this blog post. Readers are encouraged to use their discretion and exercise due diligence in evaluating the accuracy and reliability of the information before making any decisions or taking any actions based on it.